The Republic of Azerbaijan is favourably located between the East and West. The country has historically served as a bridge between the Western and Oriental traditions, having benefited from both.

Azerbaijan is one of the foremost economic reformers in the CIS. Its liberal economic system is based on institutional development, privatisation, support for businesses, co-operation with the international financial institutions and large scale international oil and gas projects. Azerbaijan is among the leaders in Central and Eastern Europe in terms of foreign direct investment per capita.

Today’s priorities include enhancement of the legal framework, diversification of economic growth and improvement of the general business environment and people’s welfare. State development programmes backed by international financial institutions are currently underway to support these goals.

The “open door” policy for foreign businesses is intended to take advantage of the great potential for international economic co-operation in such areas as manufacturing, agriculture, infrastructural development and services, among others. As part of this strategy we are happy to provide newcomers to the Azeri market with every kind of support and information.

Azerbaijan is also the largest and the fastest growing economy in the South Caucasus. It is the most effective transport link connecting South-eastern Europe with the vast and increasingly important regions of Central Asia and the Caspian Sea. Increasing numbers of professional shipping companies have engaged in transportation of goods by this link over the last ten years.

The country has a well-developed network of railways and rail ferry connections to the main ports of the Caspian Sea in Russia, Iran, Kazakhstan and Turkmenistan. The Heydar Aliyev International Airport in Baku is one of the biggest airports in the region. Direct flights operated by major international airlines connect the capital of Azerbaijan to the principal European destinations and other cities of the globe. The airport serves as a transit point for Central Asia and Afghanistan.

The government of Azerbaijan has adopted a policy of denationalization of formerly state owned property and openness to foreign capital. Azerbaijan has a number of privatized industries and others that are currently open for privatization. Foreign companies may participate in the process on equal terms with local investors.

The government of Azerbaijan welcomes foreign direct investment (FDI) in the country. In the relatively short period since independence, it has made continuous efforts to open up the economy and establish laws and regulations that are favourable to foreign investors.

New opportunities for FDI have emerged in the process. The clarity of the legal regime and the welcoming policy of the government of Azerbaijan have turned the country into one of the leaders in Central and Eastern Europe in attraction of FDI.

Over the last 11 years the total investments have amounted to about 22 bln USD. Azerbaijan has gradually improved the overall legal framework for investment activities in the country over last few years with a number of practical regulations liberalising the conduct of business and reducing “red tape”. It introduced revolutionary legal reforms several years ago with adoption of a new Tax code, Civil and Civil Procedure Code, Land and Labour Codes, Customs Code, Foreign Exchange Law and Law on International Arbitration in addition to an anti-monopoly law which made the system much more transparent and friendly for local and foreign businesses. The government has acted to open up the economy to international business and introduce investment-friendly laws and regulations. Generally, the legislation of Azerbaijan establishes a very permissive national regime for FDI, and FDI is welcome in any sectors where local businesses may invest. Such a regime also basically exists for the privatisation of state-owned property. There are no special permissions or specific registration requirements for any foreign investment. Licensing has been substantially simplified with foreign investors’ interests in mind.

A regime of non-discrimination now applies to foreign investors in Azerbaijan. The government has lifted restrictions on foreign participation in the banking sector. The privatisation process is also open to foreign investors. The few sector-based restrictions on FDI are limited to those involving national security considerations.

Among the major factors that have turned Azerbaijan into a leading FDI destination and provide reasons for doing business here are:

Abundant resources.

Azerbaijan is rich in mineral resources. The Caspian Sea oil and gas reserves are among the world’s largest. Azerbaijan also has substantial explored deposits of precious metals (including gold and silver), ferrous and non-ferrous metals and various construction materials.

One of the country’s major resources is its natural diversity. Despite its relatively small size, as a result of its varied relief and geographical location Azerbaijan has a number of climatic zones, from a humid subtropical climate to semi-arctic conditions. This creates unique opportunities in agriculture and tourism.

Favourable location

The Republic of Azerbaijan is located on the very south-eastern border of the European continent and serves as a natural bridge between Europe and Central Asia. It is also the most convenient route from northern Europe to the Middle East. Baku’s excellent infrastructure makes it the best choice for any business entering the markets of the Caspian Sea region.

Competitive production costs

Azerbaijan has a long tradition of industrial and trade activity. The industrial revolution occurred here in the late 19th century, as the production and processing of oil expanded. The country is rich in engineering skills and wages are still very competitive. The government of Azerbaijan is conscious of the importance of such areas as tariffs, and the policies adopted are manufacturer-friendly.

FDI- friendly laws

Azerbaijan’s legislation is developing in accordance with government strategy to create “welcoming” policies for foreign business. Foreign investments are protected by certain guarantees provided by the government and legislation, including:

• A guarantee against worsening of legislation - the general rule is that the legislation in force at the time an investment was made continues to apply for the following 10 years;

• A guarantee against nationalisation or expropriation - foreign investments are not subject to nationalisation (except if they are harmful to people or the interests of the state) and expropriation (except in cases of natural disaster, epidemics, accidents or emergencies). Foreign investors are guaranteed immediate, adequate and effective compensation in the event of nationalisation or expropriation. Such compensation must be commensurate to the amount of the investment at the time of nationalisation or expropriation, is payable in foreign currency and may be freely transferred abroad;

• A guarantee of compensatory damages - foreign investors are entitled to compensation for damages, including lost profits, incurred as a result of any unlawful acts of state authorities;

• A guarantee of repatriation of profits - foreign investors are entitled to repatriate profits derived from foreign investments, subject to payment of applicable taxes and duties.

The new Foreign Investment Bill that is currently under discussion in the Parliament of Azerbaijan is expected to reinforce the above guarantees and also introduce new legal instruments to protect foreign businesses. The government will continue its policy of industrial development led by the private sector, including foreign businesses.

There are no general trade restrictions or prohibitions for import of any types of goods into Azerbaijan. Naturally, there are special prohibitions for hazardous substances, weapons, drugs etc. In general, Azerbaijan has a liberal trade regime and a minimum level of non-trade barriers to international trade exists. The country is not yet a member of WTO, though the Government has started the accession process. At the moment Azerbaijan may be regarded as a country with customs tariffs below average and low import duties: the weighted average trade tariff in 2004 was 5.7% (a decrease of 0.1% from the previous year). Most import duties are between zero and 15%. Exports are not subject to any customs duties or restrictions, though regulations exist for the export of strategic commodities such as electricity, petrol, cotton and non-ferrous metals.

The Ministry of Economic Development of the Republic of Azerbaijan is the central executive body that develops and executes state policy in the spheres of social and economic development and Azerbaijan’s international cooperation. It is also responsible for macroeconomics, trade, investment, business development, privatisation and management of state property, antimonopoly activities and development of competition.

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Source - Ministry of Economic Development